U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16470 / March 16, 2000
Securities and Exchange Commission v. Jonathan C. Papa, Papa Holdings, Inc., Ponzu V, Inc., Ponzu VI, Inc., Express 1, Inc. and Papa Exp 2, Inc., Civil Action No. 99-05049 SVW (CWx) (C.D. Cal.)
On March 8, 2000, the Honorable Stephen V. Wilson, United States District Judge for the Central District of California, granted the Commission's motion for summary judgment against Defendant Jonathan C. Papa ("Papa") on the remaining issue of the relief to be paid by him. The Court ordered Papa to disgorge $3,074,621 in fraudulently obtained investor funds, together with $422,876.81 in prejudgment interest, and imposed the maximum $110,000 third tier civil penalty permitted by law.
It was undisputed that Papa, operating out of offices in Woodland Hills, Southern California, raised over $21 million from hundreds of investors nationwide from November 1995 to January 1999. Papa was the chairman of the board of directors and chief executive officer of Papa Holdings, Inc. ("Papa Holdings") and its subsidiaries, Ponzu V, Inc., Ponzu VI, Inc., Express 1, Inc. and Papa Ex. 2, Inc. (collectively referred to as the "Restaurant Subsidiaries"). Papa controlled Papa Holdings, its subsidiaries and four Papashon Restaurants in Pasadena, Beverly Hills, Encino and Long Beach, each of which closed in 1999.
Papa represented to the investors that the money raised by each of the Restaurant Subsidiaries would be used to develop, own and operate a new restaurant. In fact, Papa used investor proceeds to fund losses at existing restaurants owned by other Papa Holdings' subsidiaries. Papa also falsely represented that no officer, director or employee of Papa Holdings would receive commissions from the sale of Papa Holdings' stock, when in fact Papa received a 40% commission on sales he personally made and an 8% override on sales made by others.
Previously, pursuant to his consent, Papa was permanently enjoined from future violations of the securities registration, antifraud and broker-dealer registration provisions of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
For additional information, see Litigation Release No. 16141 (May 13, 1999).